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Peter Gorski venture news and start-ups strategy that don't suck!Thu, 21 May 2015 08:39:08 +0000en-UShourly1Michael Porter is Bankrupt AND the Framework of a Blindfolded Chimpanzee.http://www.gorskiventures.com/michael-porter-is-bankrupt-and-the-framework-of-blindfolded-chimpanzee/
http://www.gorskiventures.com/michael-porter-is-bankrupt-and-the-framework-of-blindfolded-chimpanzee/#commentsTue, 13 Nov 2012 03:09:08 +0000http://www.gorskiventures.com/?p=1069This post is dedicated to a good friend of mine and a loyal reader, Diego del Rio Diaz-Jara, who found a programming bug in my blog. Big tx, Diego!

This weekend I was sitting in a lecture by Michael E. Porter‘s former apprentice and current teaching professor at Wharton School of Business. Porter’s paper on Five Forces became one of the most influential frameworks for performing industry analysis and business strategy development. It absolutely makes sense: five forces influencing business strategy… wow, so easy but yet so powerful…

Surely, Dr. Porter must be a successful businessman? Not so fast, amigo… This week, Monitor Group, the consulting firm set up in 1983 by him and another strategy guru Mark Fuller, just filed for bankruptcy protection. The firm has specialized in strategy consulting to senior officials of businesses and governments. At the time of filing the firm had approximately 1,500 employees, making it smaller than some of its peers in the top-tier strategy consultancy league (including Bain, BCG and McKinsey), but still a highly influential firm on the global management consulting stage due to the senior relationships that it had.

In court bankruptcy documents, Monitor wrote that demand for consulting work slowed dramatically during the financial crisis of 2008. Revenues shrank and liquidity tightened. The firm’s partners advanced $4.5 million to the company and passed on $20 million in bonuses in 2009. It also raised $51 million by issuing notes to private equity firm Caltius Capital Management.

Experiencing serious financial difficulties this year was the final straw for Monitor. In September and October 2012, the company was unable to pay rent on its Cambridge, Mass., headquarters. However, the company negotiated a plan to catch up on the payments but the following month announced that it simply was unable to make another payment. Monitor also missed an interest payment to Caltius, putting the notes in default.

Despite receiving near-universal acclaim from both business people and top MBA programs, Porter’s framework has been challenged by other academics and strategists such as Kevin P. Coyne and Somu Subramaniam. They have pointed out to these three questionable assumptions made by the model:

Buyers, competitors, and suppliers do not interact, and will not collude

The source of value is structural advantage (creating barriers to entry)

Business certainty is high, allowing market participants to plan for and respond to competitive behavior.

In the mid-1990s using game theory, Brandenburger and Nalebuff successfully argued for adding another force, complementors (also called “the 6th force”), helping to explain the reasoning behind strategic alliances.

In its Chapter 11 filing in federal bankruptcy court in Delaware, Monitor reported having between 1,000 and 5,000 creditors, including RBS Citizens Bank, Standard & Poor’s Capital IQ, and various real estate, consulting and audit firms.

Under the asset purchase agreement with Deloitte, the purchaser will take over Monitor’s US practice, while its foreign arms get the foreign offices of Monitor.

My Two Cents…

Could it be that Porter’s firm became a victim of his own work, the dubious assumption of “low business uncertainty”? My belief is that while analyzing all of the six forces can be a helpful exercise in resolving some of the business uncertainty, the rapid pace of change in our physical environment makes many strategy decisions quickly obsolete. The fate of Monitor seems to confirm my long-standing suspicion: Even a blindfolded chimpanzee throwing darts at the Five Porter Forces framework can select a business strategy that performs as well as that prescribed by Dr. Porter and other high-paid strategy consultants.

Let’s agree to call this, The Framework of One Force and A Blindfolded Chimpanzee.

]]>http://www.gorskiventures.com/michael-porter-is-bankrupt-and-the-framework-of-blindfolded-chimpanzee/feed/3Is Yammer doing better than Chatter?http://www.gorskiventures.com/is-yammer-is-doing-better-than-chatter/
http://www.gorskiventures.com/is-yammer-is-doing-better-than-chatter/#commentsMon, 29 Oct 2012 23:36:21 +0000http://www.gorskiventures.com/?p=1057A few weeks back I attended a presentation by Yammer CEO and founder, during which he claimed that Yammer is doing better than Chatter and in the long run it will do far better still.

Chatter vs. Yammer

At a glance, these two San Francisco-based rivals appear to be quite similar. They both market to enterprises of all sizes. Both are growing at very healthy rates and both assume similar positions in the market. Salesforce calls itself ‘The Social Enterprise™’ company, while Yammer’s tagline is ‘The Enterprise Social Network.’ The first hint of difference is revealed in that little ™ to the right of the Salesforce tagline. Trademarks stake proprietary claims. They just don’t feel as open as social media companies usually feel. Yammer stakes no such claim on its tagline.

To me, the Chatter and Yammer products pretty much look alike as well; and both resemble Facebook. In fact, both companies use the phrase, “Facebook for the Enterprise” when describing their products.

Sacks presented many statistics to show that Yammer was prevailing. He said that sometime last year Yammer “blew right past” Chatter when the two companies both had 2.5 million enterprise seats. While Chatter has been growing at a reported 40 percent per year, Yammer tripled last year, will triple again this year and will continue to triple into the foreseeable future.

But the compelling part was not in the numbers but in the companies’ two disparate cultures as well as their marketplace approaches. Sacks talked about Yammer as a catalyst for what he called “consumerization of the enterprise.”

Sacks asserted that Salesforce behaves like a traditional enterprise software company, marketing from the top down and not to the people who are supposed to use the stuff to do their jobs better.

Sacks concedes that Chatter succeeded in this way particularly because of the clout and contacts of its founder. “Many of their early wins came from FOBs—Friends of Benioff, who are entrenched in high places including boards of directors. Additionally, the company invests heavily in traditional marketing, advertising and events such as the recent Cloudforce gathering in San Francisco’s Moscone Center.

Yammer is a child of a younger generation. It was born a full decade later. Launching in September 2008, it won the best-of-show award at the TechCrunch50 Conference. That victory netted the company investment dollars and early adopters who have served as Yammer evangelists in the enterprise. Yammer markets to the people who will use their software. It offers everyone a free trial, which results in one of five users purchasing it. They then encourage workplace colleagues to join them. It rarely spends on advertising, but is extremely active on social media venues.

In keeping with general web company approaches, Yammer is a peer-to-peer marketer, and its success depends on behaviors that are studied by consumer marketers far more than IT decision-makers.

The seeding of new ideas and materials in users is not much different from using new ideas to join people who overthrow governments. But in fact it has been just as disruptive in the enterprise for at least four decades, when the PC devastated IT loyalty to the mainframe in the basement. It is why enterprise employees today are tossing their free Blackberries so they can use iPhones or Android devices.

And consumerization makes sound business sense from my perspective. It’s about the employees’ right to choose and the wisdom of the workgroup. Enterprise decision-makers should want employees to use the tools they feel will let them get the job done best. Such policies simultaneously improve efficiency, productivity and morale. Consumerization is all about the enterprise user’s right to choose.

Another differentiation, Sacks argued, was open versus closed. He said that Yammer is designed as a platform that inter-operates with all enterprise software while Salesforce, ” wants to be the total stack. They want to be Oracle for the Cloud.”

By contrast, he said, “Yammer is a social Switzerland. We will integrate with anyone.” ”They want to be the total stack. he said.

The rivalry between these two companies is hardly one for survival. Both companies are showing stellar performances by any measurement. Benioff said at Cloudforce that Chatter grew last year by 40 percent and is on track to continue at the same pace this year.

Final Thought…

Ultimately, start-ups end up with a single winner. When it comes to enterprise social, the king is likely to be either Microsoft-backed Yammer or Salesforce Chatter. The deciding factor in my view is the go-to-market strategy and value- proposition (i.e. employee productivity) that each product is able to demonstrate to its enterprise clients.